Basque Country housing prices surge amid Spain-wide crisis

Housing prices surge in the Basque Country and across Spain

Housing prices are skyrocketing in the Basque Country and throughout Spain. The most common diagnosis in public debate points to a supply problem, with the Basque Country serving as a case study: according to available data, urban and developable land accounts for less than 7% of the territory, while the remaining 93% is classified by politicians as non-developable. Critics draw an uncomfortable conclusion: scarcity hinges not on geography, but on the political will to release land.

The dominant thesis argues that shifting demand toward purchasing—driven by the disappearance of residential rental supply and a lack of new developments—is pushing prices to bubble levels. The counterargument comes from another angle: building more would only attract more demand, and large holders would continue buying entire buildings at discounts unreachable for individuals. Their proposed solution is not more cranes, but more regulation.

Why do housing prices rise when construction is low?

The starting argument is that interventionism in any economic sector causes high costs and scarcity. Applied to real estate, the result is a cocktail of three ingredients: the withdrawal of residential rental supply, the lack of new developments, and the absence of land released for urban use. With this combination, housing prices increase uncontrollably, according to this diagnosis.

The response from the other side is that building more is useless because the same players keep buying in areas with real demand: funds, financial institutions, and large holders acquiring entire buildings. They argue the problem would become chronic rather than resolved. They add an uncomfortable example: the United States is a more liberal country, with much more land for construction and half the density, yet it suffers a biblical-scale bubble.

Land as the key to everything

The analysis stalls at the issue of land. A Basque Government expert would acknowledge the problem is supply-related but add that building in the Basque Country is very difficult due to lack of terrain. The immediate rebuttal is that land is not missing; it is classified. Criticism targets artificial costs that would bury any project—land purchase price from municipalities, developer-funded social housing (VPO), taxation—not topography.

Some recall that during the developmentalist era, families could build freely on their land, and private developers urbanized wastelands at the pace set by demand. Today, many of those plots are surrounded by empty parcels where construction is prohibited because they are rural, industrial, or within an urban plan. The result is an aging property stock while available land sleeps.

The demographic argument and vacant housing

A recurring objection is that the Basque Country is an aging region, with an inverted population pyramid and mortality exceeding birth rates. Each year, old homes fall vacant due to simple natural decrease, and immigration only partially mitigates this effect. The question raised is what the net result of these two opposing phenomena is before deciding if more construction is needed.

The distinction introduced is key: it is not the same to see prices rise where the population increases—economic activity, people staying—as where people move massively seasonally. In the first case, building makes sense because housing is a basic necessity. In the second, it is a luxury good whose demand can be regulated. This brings up differentiated Property Tax (IBI) between primary residence and others, a measure that, according to this analysis, is not applied due to lack of will.

The fading rental market

The law protecting tenants who do not pay is emptying the rental market, according to the most widespread interpretation. Fewer owners are willing to rent out: they either leave flats empty or convert them into tourist accommodation. The reasoning is simple: if an owner is forced to house a non-paying tenant for free, no sane owner will rent. Rising rents would not be the cause, but the symptom.

The corollary is that the problem is not a lack of housing, but a lack of housing-for-living. Part of the property stock functions as housing-for-not-living: tourist apartments, second homes, empty properties. If a city has as many dwellings as inhabitants, it is hard to justify building more. The priority should be transforming that idle stock into livable housing, by changing rental laws or penalizing vacancy.

The liberal recipe and its history

The most aggressive proposal involves automatic land release: any plot adjacent to developed land would become developable, and freedom to build would exist in rural areas. They add zero taxes for those who build housing, removal of regulations and obligations for builders, and promise to triple construction in one year. The argument is that if building becomes a huge business, everyone will jump on board.

History works against this. The so-called land liberalization of the nineties was partly overturned by the Supreme Court and coincided with runaway prices. And the Land Law dates back to 1956, the most knowledgeable remind us. The discussion on whether the regulatory framework was liberalized or further regulated remains open, and no one closes it.

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With these elements, housing prices will continue to hit highs as long as developable land remains below 7% and the vacant stock remains unmobilized. The train is moving at full estimulante ilegal, and the question of who pays the fare has a known answer: those with the least resources to bear delirious hikes. The rest is debating whether the driver is the market or the BOE (Official State Gazette).